The mobile home that Nancy Lugo and her two children live in might not seem like much to many people.

It sits off a dirt road, by a slow-moving creek, on the outskirts of the tiny Georgia town of Uvalda. It is surrounded by thick forest and fields full of the local speciality: Vidalia onions.

But for Lugo, 34, it is a symbol of a better life in America. Here in Georgia, far from her native Mexico, Lugo has a solid job, sends her kids to school and loves the rhythm of rural life. "It is peaceful. I am happy here," she said.

The patch of land she bought for her trailer was vacant before she came. But she dug a well and sank septic tanks, carving a home from the wilderness in a grand American tradition. She got a job. She paid her taxes.

Now it is all under threat.

For Lugo is an illegal immigrant in the deep south. In the midst of general anti-immigrant sentiment, several southern states have passed strict anti-illegal immigrant laws that critics say raises the prospect of a new Jim Crow era – the time when segregation was law –across a vast swath of the old Confederacy.

They will ostracise and terrorise a vulnerable Hispanic minority with few legal rights, encouraging them to leave or disappear further into the shadows.

In Georgia, Alabama and South Carolina, new laws have been signed that represent the toughest crackdown on illegal immigrants – the vast majority of whom are Hispanics – in America. They give the police sweeping new powers and require them, and employers, to check people's immigration status. In Alabama, they even make helping illegal immigrants, by giving them a lift in a car or shelter in a home, into a serious crime. For many, the laws echo the deep south's painful history of segregation, sending out a message to people of a different colour: you are not wanted here.

"That is exactly right," said Andrew Turner, a lawyer with the Alabama-based Southern Poverty Law Centre. "We view it within the context of the history of the deep south. It is using the law to push out and marginalise an ethnic minority."

The new laws' defenders deny that. They are merely enforcing the law, they say. Their problem is not with immigrants, but with those who came to America illegally. They say the laws are colour-blind and aimed at making sure everyone obeys the same rules and does not cheat the system.

Yet illegal immigrants have become a fundamental part of the American system. Huge swaths of the economy rely on the cheap labour they provide.

From construction to agriculture, to restaurants to gardening, to childrearing, hotels and home help, illegal immigrants are a major driver of the US economy. They may have no papers, but that does not stop them paying taxes, buying homes and raising children who, if born in the US, are American citizens. It has also – as happened during the civil rights era – put these southern states in direct conflict with the federal government. Last week, the White House moved to suspend many deportations of illegal immigrants without criminal records, putting it at odds with the new, harsher state laws.

Which is why Lugo is speaking out. Though illegal, she is angry at feeling suddenly hated by a society she has contributed to. She has two kids and a hard, low-paying job in a factory that makes US army equipment. When Georgia passed its law she was laid off by a manager fearful of prosecution. Yet, within a month, she was rehired. No one had wanted her work. But suddenly it showed how vulnerable her new life was.

"You fear that if you look Latino then they will stop you and send you home. But I have to stay here for my kids. I don't know how, but I will stay. I am afraid. But more than that I am angry," she said. She repeated the word like a mantra: "Angry. Angry. Angry."

Someone else who is angry is Paul Bridges, mayor of Uvalda. "I don't believe the state should tell me who can get in my car or that I should ask to see their papers before they come to my house," he said, sitting in the new city hall of the community of 500 souls.

Later, driving around the sleepy town on a day when temperatures topped 100F (38C) and the air felt like treacle, Bridges pointed out where Uvalda's Hispanic population lives. He knows everyone and showed where abandoned houses had been fixed up by a Hispanic family or vacant lots transformed into homes. Aside from being racially tolerant, Bridges is self-interested: new homes equal more taxes for his city budget. "There is also lots of mixed status here. In one house you could have a citizen, an undocumented person, and someone with a work visa," he said.

But across the southern states that have passed new laws, Hispanic people are leaving. In Uvalda several families have upped sticks, either selling homes or shuttering them. It is the same in Alabama. Maria Santiago, 23, is a child minder in Birmingham, the state's largest city. She has been in the US for 11 years, her son is a US citizen, but she is illegal. "A lot of our neighbours have left. They have lost their jobs. Every week people go back to Mexico," she said.

In Alabama, that is no wonder. It has passed the harshest anti-illegal immigrant law in America. It allows police to check people's immigration status on traffic stops. It makes it a crime to transport or to rent property to people known to be illegal. Alabama church leaders have complained that it criminalises performing marriages, baptisms or simply giving people lifts to church if they involve an illegal immigrant.

Other states have not gone quite so far. The Georgia law had similar harsh provisions suspended by the local courts, although the state has appealed against the decision and could get them re-instated. South Carolina contents itself with more efforts at having police check people's status and forcing employers to make more stringent checks.

But, critics say, the impact is the same across the region. Concerned parents are afraid to register their children in schools. Many Hispanics are worried to drive, out of a fear that they will be stopped. By involving the police in immigration enforcement, Hispanic activists say crimes will go unreported as people will not come forward in case their immigration status is checked. That has huge implications for tackling domestic abuse, gang violence or any crime that a Hispanic person might witness.

Isabel Rubio, director of the Hispanic Interest Coalition of Alabama, described it in colourful southern terms: "Getting a Hispanic witness is going to be like pulling teeth from a lizard's mouth."

Theoretically, some Hica activities could even become unlawful. In a back office near a dilapidated-looking mall in suburban Birmingham, Hica recently hosted a women's meeting. Everyone was illegal. But they – like most people who come to Hica – are taking English lessons, and getting legal help and advice on coping with domestic abuse.

Rubio shook her head at the potential impact of the law. "It's a huge step backwards. After all the progress that has been made in terms of race, and then his happens. Where do I begin?" she said.

Then she produced a copy of the law and pointed out a shocking segment. In the text there is an exemption for domestic service, meaning that anyone with an illegal immigrant maid is not defined as an "employer" under the law. It was a grim reminder of old social realities. "It's Alabama," said Rubio. "It means you can still have your Latina household help."

Back in Uvalda, Howard Morris's business is not so lucky. Leaning on a tractor with his forearms coated in Georgia mud and sweat pouring down his face from the late-afternoon heat, Morris is worried. He owns 40 acres of onion fields, but fears no one will harvest his crops.

"The people that we normally hire are just not here," he said. That is bad news for somewhere like Uvalda, which is reliant on agriculture.

Morris knows that if the Hispanics who have left do not come back, there will be trouble. "The crop could rot in the ground," he said. That concerns Bridges, the mayor. "If we can't harvest, it will decimate this community," he said.

The problem is not unique to Uvalda. The Georgia Agribusiness Council estimates the labour shortage has left so many crops unpicked and rotting that it has cost $1bn. The industry currently has 30% fewer workers than it needs and, contrary to accusations that illegals take American jobs, no one is stepping in.

Nor is it just agriculture. The Georgia restaurant trade is in convulsions as staff flee. Karen Bremer, head of the Georgia Restaurant Association, says a quarter of her members' businesses are struggling with too few staff. "The damage has been done. The bad news has already gone through the communities," she said.

From an economic standpoint, passing such stringent laws has been a dramatic own goal. Recently a violent tornado tore through the Alabama city of Tuscaloosa, wreaking havoc and devastation. But the exodus of Hispanics from Alabama has been so great that building firms say they will struggle to employ enough people for rebuilding. Indeed, Tuscaloosa's Hispanic soccer league saw a third of its teams disbanded in a week.

This is the paradox: the political backlash has come as Hispanics, and illegals, have become an integral economic and demographic part of the south. The region, outside Florida, has traditionally had only a small Hispanic community but now – fuelled by illegal immigration – it is rapidly growing. The Pew Hispanic Centre estimated that Georgia had an illegal population of some 425,000, most from Hispanic countries. The same study showed Alabama had a population of 125,000 illegal immigrants and has seen its Hispanic population jump 145% in a decade. That is a major ethnic shift in a region whose very history is riven with struggles over race, economic exploitation and southern identity.

But a fightback for a Hispanic place in the deep south has begun. One of the more dramatic moments happened when a car pulled up outside Georgia's state Capitol in Atlanta recently. Out got the frail figure of Salvador Zamora, a Hispanic activist. Zamora has been on hunger strike since 1 July, when Georgia's law came into effect. In that time he has shed more than 2st 2lb (13.6kg).

He was so weak that he sat in a wheelchair as he was taken into the building to hand over a protest letter to Georgia governor Nathan Deal. "I want these laws to change. I am not worried about me. I am worried about other people. I will do this as long as it takes," Zamora told the Observer.

Zamora, who was accompanied by leading Atlanta church figures who were black, white and Hispanic, conducted his protest in the vein of the civil rights struggle of the 1960s. That was no accident. Across the south, other activists and groups are taking that lead by combining street protest and activism with legal challenges in the courts.

Demonstrations and candlelit vigils have been held in Alabama and Georgia. In Atlanta, thousands of protesters marched through the streets in one of the biggest demonstrations since the civil rights era. In another action, six young students revealed their illegal status and were arrested for a sit-down protest. One was Dulce Guerrero, 18. She was born in Mexico but has lived in America since she was two. She is a high-flying student with excellent grades. But Georgia's new law – which threatens her with deportation – has been a radicalising event. She had no regrets about her time in jail.

"It was time to take action," she said "I am American in everything but papers. I speak better English than I do Spanish. I don't remember life in Mexico."

Many others have spoken out. Church leaders have joined forces with lawyers and business groups and police officials. Suits have been filed attempting to get the law overturned. The federal government has weighed in via the courts, as it did in Arizona when that state attempted a similar act. In general, like many illegals themselves, most opponents want a "path to citizenship" or a work scheme for people already here.

Among them are people like Bridges, who is far from a typical liberal campaigner. He is a proud southerner and Republican who has little time for President Obama. But he joined a lawsuit filed by the American Civil Liberties Union; a conservative bête noire. "I dislike the ACLU but I find myself on the same side. It is shocking to me," he joked.

But he insisted the new law was the work of politicians ignorant of new economic and social realities. "The vast majority of Georgians are not racist. Things have truly changed here," he added.

The outcome of the battle remains to be seen. People like Guerrero say they will not stop fighting their new Jim Crow. She recalled the feeling of handcuffs being put on her. She remembered her happiness at the policemen who said they sympathised as much as anger at those who did not. And she swore to keep fighting. "That was only the beginning," she said.